Are you looking for an investment plans to get higher tax deductions on your income. If yes, then read this article to know 3 best investment plans that can help you in your tax planning.
Public Provident Fund
Public provident fund or PPF is a long term investment plans in India which will give you 8.7% interest per year. Section 80C of income tax act, allows tax deduction on the amount that you contribute every year to the public provident fund account. You can also claim tax deductions under section 80C for the contribution to your children’s and spouse’s PPF account.
Interest that is accrued every year is also tax exempted. You are neither required to pay income tax for the year nor at the time of withdrawal from your PPF account.
At the end of 15 years if you want, you can extend the PPF account tenure by 5 years. For the extended period also you can claim tax deductions.
PPF is an all time favorite investment plan and advised by many financial advisors as a long term investment plan with higher tax deduction and high interest rate compare to any other investment plans.
- How to invest in PPF Scheme
- How to withdraw my PPF investments
- How to take loan on my PPF investments
Life insurance Policy
Investment to Life Insurance policy is also eligible for income tax deduction under section 80C. Amount paid toward premium for life insurance to ensure your own life, spouse, children’s life will entitle you to claim income tax deduction.
The reason of keeping LIC in second position of our traditional investment plan’s list is because it gives low return compare to PPF. Average per year interest rate for LIC is 5-7% per year with the only benefit is that life of the policy holder will be ensured.
Employee Provident Fund
For employees contribution to employee provident fund is compulsory. This contribution is eligible for tax deduction under section 80C. However, you can not open your account on your own. Your employee can open EPF account after you join them if the company is coming under PF act. One of the problem is you can not withdraw from your PPF account unless you retire with some exceptions like medical emergency, purchase or construction of house or for a child’s marriage.
- How to withdraw from your EPF account
- How to check your EPF balance
- How to withdraw fro Your EPF account without employer’s signature
- How to check your EPF claim Status online
These traditional investment plans are not only giving you higher tax deduction but also treated as a safe investment option where as chances of losing money in investment plans like equity linked saving schemes, ULIP and mutual fund is high.